Market experimentation leads to price-dispersion in competitive industries.
This paper looks at how companies in a competitive industry can learn from their sales to make better decisions. By experimenting in the market, firms can understand demand and set prices accordingly. The study shows that this learning process can lead to different prices for similar products in the industry. The researchers use a duopoly model to demonstrate this, and then expand their analysis to industries with more than two firms. They also discuss how sharing information about demand can benefit everyone in the industry. Additionally, the paper explores what happens when having information is not helpful for companies in the industry.